Exercise 20-13 (Algo) Loss contingency [LO20-4]

The Commonwealth of Virginia filed suit in October 2019, against Northern Timber Corporation seeking civil penalties and injunctive relief for violations of environmental laws regulating forest conservation. When the financial statements were issued in 2020, Northern had not reached a settlement with state authorities, but legal counsel advised Northern Timber that it was probable the ultimate settlement would be $1,750,000 in penalties. The following entry was recorded:

Losslitigation	1,750,000
Liabilitylitigation		1,750,000

Late in 2021, a settlement was reached with state authorities to pay a total of $1,200,000 to cover the cost of violations. Required: 1. Prepare any journal entry(s) related to the change. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

• Record the revision of the liability on the basis of the new estimate.